Climate change, could it affect your property and mortgage?

From flooding to coastal erosion – some properties are more at risk from climate change than others.

Many lenders, including first direct, are now considering the risks associated with climate change when deciding whether to lend against a property.

So, let’s look at some of the risks and let you know where to go for more information on how your property could be impacted by climate change. We’ll also tell you how these risks could impact a mortgage you already have or are looking to take out.

How could climate change affect a property?

Some of the ways a property could be affected by climate change include flood, coastal erosion, landslide or subsidence and sinkholes.

Flooding

According to the Environment Agency, the UK is experiencing more frequent flooding, leaving millions of properties at risk in England alone.

You can check the risk of flood in your area with the Environment Agency or one of their sister organisations across the United Kingdom. They also offer guidance on preparing for a flood and what to do during and after a flood.

To check the risk of flood in your area visit:

• www.gov.uk if your property is in England
• www.sepa.org.uk if your property is in Scotland
• www.naturalresources.wales if your property is in Wales
• www.nidirect.go.uk if your property is in Northern Ireland

The National Flood Forum is a charity that helps, supports, and represents people at risk of flooding.

Visit nationalfloodforum.org.uk

Insuring a property at high risk of flooding

If your property is at high risk of flooding it could be more expensive or harder to insure. Flood Re is a joint initiative between the Government and insurers which aims to make the flood cover part of home insurance more affordable.

Visit www.floodre.co.uk/

Coastal erosion

Coastal erosion is the loss or displacement of land, due to wind, waves and tides. With extreme weather and rising sea levels, more properties will be at risk of losing their full value due to coastal erosion.

You can check the risk of coastal erosion in your area with the Environment Agency or one of their sister organisations across the United Kingdom. You can also read their Shoreline Management Plans which gives you more information on how coastal erosion risks are managed in your area.

To check the risk of coastal erosion in your area visit:

• www.gov.uk if your property is in England
• www.dynamiccoast.com if your property is in Scotland
• www.naturalresources.wales if your property is in Wales

Landslide

A landslide is the movement of rock, debris or soil down a slope. It’s caused by various things, including heavy rainfall or drought, which make the land unstable.

You should also seek specialist advice from a structural surveyor or geologist, for example, especially if you plan on starting any major building or drainage work.

Subsidence and sinkholes

Subsidence and sinkholes occur when the ground below a property caves in or sinks, reducing its value.

Soil expands in wet weather and contracts in dry weather. With the UK expected to see wetter winters and drier summers, the soil beneath our homes can become unstable.

Properties built near large trees (where the roots disturb the soil) or on top of old mining quarries, may be at risk to subsidence and sinkholes.

What you can do before you apply for a mortgage

If you’re concerned that the property could be at risk of climate change, you may want to instruct a surveyor to complete an in-depth survey, before you apply for a mortgage or borrow more on your existing mortgage.

If your lender considers the property to be at risk from the effects of climate change, they may decline your application or ask you to confirm you have suitable cover in place

How could climate change affect my mortgage application?

More and more lenders are now completing further checks to assess whether a property is at risk due to climate change and whether they’ll lend against that property.

As a result, it can be harder to get a mortgage on a property that’s at a ‘high risk’ of being impacted by climate change – especially if you’re unable to insure it due to flooding or the land being unstable.

When purchasing a property, your solicitor or licensed conveyancer may carry out an environmental search to check for any issues with flooding that might affect the property’s value or if an old mining search is needed. They will then advise whether any specialist reports are needed to understand the impact on the property.

Your lender will make their own assessment of the risks or use those in any specialist report requested by your solicitor or licensed conveyancer. If they consider the property is at too high a risk from the effects of climate change, they may ask you to confirm that you have a suitable home insurance policy in place or decline your application.

If you already have a mortgage

If you’re concerned that your property could be at risk of climate change, check your home insurance policy. Most policies will cover events that could be caused by climate change, but the level of cover you have depends on your policy – they aren’t all the same. Any exclusions and limitations can differ between providers. You should review your policy annually to make sure that you have the right cover in the event of a claim.

Most lenders, including first direct, request that you take out and maintain buildings insurance for the term of the mortgage. So, if you don’t have home insurance, you should arrange cover as soon as you can as your lender may ask you for a copy of your insurance certificate. If you have a first direct mortgage, make sure your new policy covers the full re-build value of your home.

If you need more help, speak to an independent insurance broker. You can also get free and impartial help from organisations such as MoneyHelper or the Citizens Advice Bureau.